You have to freeze the transformation > clear the transformations and double click the rotation button to pull out a menu for the transformation to switch to global transformation from Local. This happens when you have too much history of rotations on one object. EDIT: Be sure that the object is selected before you freeze…
Have you tried resetting the transforms of the model? Should be... "On the MCP (right hand tool bar) click on transform.. and then reset all transforms"
This can also happen if the object is part of a hierarchy. The transform of a parent will affect the transform of its children, so if you use the Reset Transform utility on a parent object, the children might change drastically.
any parent transformations are passed on to the children, it sounds like the locator had transformations on it, and when you un-parented the object the parent transformation was removed